Wednesday, October 01, 2008
The bailout evolves...
[Programming Note: Be sure to tune in for tomorrow's Political Mayhem Thursday, which will be guest-hosted by Razor provocateur RRL. In the future, I hope to have Lane, IPLawGuy, and the Waco Farmer guest-host as well, if they are willing]
I know that many people did not agree with my take on the bailout plan, but I do have some heavy-hitter economists on my side. Like me, they saw the bailout as a subsidy to investors at taxpayer expense. I do understand that there is a credit crunch right now, but credit is a market, and markets react. If there is money to be made in lending (and there is right now), the market will go there.
The newest proposal from the Senate combines the original $700 billion bailout (which will require tax money to fund it) with... tax reductions. Sigh. Seriously, could there be a more irresponsible move? Yesterday, I spoke to a fifth-grade class about the Constitution. One of them asked about the bailout, and if it was a good thing. My (too honest?) response was that it probably was a good thing for me, but a bad thing for them, as they will have to pay for it someday.
Comments:
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Good post. I am starting to come around. Part of me wonders whether a Great Crash and Second Great Depression is not, perversely, just what we need.
As you know, I am convinced that our seventy-year Keynesian interlude must come to a close regardless of what we do here. For me, the question is hard crash or soft crash.
My hope is a soft crash-landing in which we walk away chastened and repentant.
An Aside: my main worry concerning the bailout/rescue (although I support it) is that we will buy ourselves some extra time to further ignore our new reality and blithely go on with business as usual until we come to the next cliff.
Although the economists make good logical arguments (the best I have heard--much better than the class warfare claptrap), I am also still sensitive to the other side.
Tom Friedman in today's NYT articulates my feelings:
http://www.nytimes.com/2008/10/01/opinion/01friedman.html?_r=1&hp&oref=slogin
An excerpt:
We’re all connected. As others have pointed out, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.
Some metaphors of my own:
You cannot safely burn down one room of your house.
Driving your car into a telephone pole to injure the person in the passenger seat is not a healthy policy--even if they deserve to die.
BTW, I am honored to accept the future invitation to guest host PMT.
As you know, I am convinced that our seventy-year Keynesian interlude must come to a close regardless of what we do here. For me, the question is hard crash or soft crash.
My hope is a soft crash-landing in which we walk away chastened and repentant.
An Aside: my main worry concerning the bailout/rescue (although I support it) is that we will buy ourselves some extra time to further ignore our new reality and blithely go on with business as usual until we come to the next cliff.
Although the economists make good logical arguments (the best I have heard--much better than the class warfare claptrap), I am also still sensitive to the other side.
Tom Friedman in today's NYT articulates my feelings:
http://www.nytimes.com/2008/10/01/opinion/01friedman.html?_r=1&hp&oref=slogin
An excerpt:
We’re all connected. As others have pointed out, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.
Some metaphors of my own:
You cannot safely burn down one room of your house.
Driving your car into a telephone pole to injure the person in the passenger seat is not a healthy policy--even if they deserve to die.
BTW, I am honored to accept the future invitation to guest host PMT.
And I am coming to the center on this issue, too, though I still emphatically think this is the wrong kind of intervention to make. Larry Bates, who knows a lot about these issues (bankruptcy expert, after all), has had an influence on me.
I do think this Senate plan, with tax cuts, is worse than the original plan.
I do think this Senate plan, with tax cuts, is worse than the original plan.
Hosting a Political Mayhem day? Serious political issues may not be my forte.
Here are topics I would feel comfortable handling or moderating:
-Great Rock Guitar players: Clapton, Hendrix, Page... do Jeff Beck, Eddie van Halen and others belong or not? What qualifies as "great"? technical greatness or influence.
-Steroid era baseball records, what to do with them?
-The Designated Hitter rule and why its an abomination to all that is good and holy.
-Dodge Chargers featuring .440 engines.. the greatest cars ever?
-Stick shifts: Why don't American car makers make them available on most cars anymore?
-Why DO slow people stay in the left lane anyway?
-Hogan's Heroes v. Gilligan's Island.
Here are topics I would feel comfortable handling or moderating:
-Great Rock Guitar players: Clapton, Hendrix, Page... do Jeff Beck, Eddie van Halen and others belong or not? What qualifies as "great"? technical greatness or influence.
-Steroid era baseball records, what to do with them?
-The Designated Hitter rule and why its an abomination to all that is good and holy.
-Dodge Chargers featuring .440 engines.. the greatest cars ever?
-Stick shifts: Why don't American car makers make them available on most cars anymore?
-Why DO slow people stay in the left lane anyway?
-Hogan's Heroes v. Gilligan's Island.
# posted by 
: 3:43 PM
: 3:43 PM
I say let them go bankrupt. That punishes the foolish investors, removing a serious moral hazard, while preserving the underlying wealth that remains in these failed enterprises.
Alternatively, give the money to the people. just cut each of us a check and let us figure out how best to use it to alleviate our pain. Also, prosecute these crap CEO's and bankers, especially the sub-prime mortgage guys. You can't tell me that fraud wasn't part of this at some level. I'd spend part of my check on pay-per-view to watch the sentencings of these a**hats.
In the long term, more transparency is needed and people should remember that invaluable lesson from the '80s: balloon mortgages suck.
Alternatively, give the money to the people. just cut each of us a check and let us figure out how best to use it to alleviate our pain. Also, prosecute these crap CEO's and bankers, especially the sub-prime mortgage guys. You can't tell me that fraud wasn't part of this at some level. I'd spend part of my check on pay-per-view to watch the sentencings of these a**hats.
In the long term, more transparency is needed and people should remember that invaluable lesson from the '80s: balloon mortgages suck.
# posted by : 5:38 PM
: 5:38 PM
I love the United States Senate.
Tonight one of my favorite institutions lived up to its billing as the "World's Greatest Deliberative Body."
Tonight one of my favorite institutions lived up to its billing as the "World's Greatest Deliberative Body."
I don't know what's more irresponsible than... doing nothing! I know more about what two people running for president are doing to "solve" this financial crisis (a bit late for that) than I know what the current administration is doing. Lamenting the fact that its bill was not passed? Well... you're the party's moral leader, get out there and get it done!
Not that the bailout is necessarily a good idea, mind you. A friend of mine (who is not an American) did weigh in with this opinion, though: taxpayers should foot the bill for shoring up our floundering economy because it is our fault. After all, we did elect the people that created the current situation through deregulation and bad economic policy. Why should we be insulated from the consequences of our bad voting?
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Not that the bailout is necessarily a good idea, mind you. A friend of mine (who is not an American) did weigh in with this opinion, though: taxpayers should foot the bill for shoring up our floundering economy because it is our fault. After all, we did elect the people that created the current situation through deregulation and bad economic policy. Why should we be insulated from the consequences of our bad voting?
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